According to the British news agency, Novatek Group - Russia's largest liquefied natural gas (LNG) producer - is selling liquefied natural gas (LNG) from the Arctic LNG 2 project at a deep discount of up to 30-40% to Chinese customers.
This is one of the largest discounts ever recorded on Russian LNG after the $21 billion project was included in the list of strict sanctions imposed by the US and Europe.
The first batch of LNG sold since December 2023 only appeared at the end of August this year, after months of goods floating in the middle of the sea or having to be put into floating warehouses, causing Novatek to spend millions of USD more per day.
According to industry sources, the first batch of goods delivered on August 28 was sold 3-4 USD lower than Asian LNG standards (about 11 USD/mmBtu). The next batches, a total of 14 trips since August, all have a "shocking" discount of 30-40%, bringing the value of each trip down to 28-32 million USD, much lower than the market price of more than 44 million USD.
To free up the trapped LNG, Russia has little choice but to sell it at a wholesale price to China - a country that opposes unilateral sanctions and is Moscow's largest energy customer.
China has approved the purchase of LNG from the Arctic LNG 2 project, despite strong warnings from US President Donald Trump, who is stepping up a strategy to tighten revenue from Russian oil and gas to pressure Moscow to end the conflict in Ukraine.
However, Washington has not yet imposed direct sanctions on Chinese entities participating in purchasing Russian LNG.
Analysts say the US is having to consider carefully: Handling too harshly could disrupt the fragile trade deal just reached with Beijing, while reducing the chance of signing more US-China LNG contracts in the future.
In fact, since February, China has stopped importing US LNG due to tariffs in the trade war.
Since August, almost all of Russian LNG has been brought to the busier port - a medium-sized facility in southern China.
Notably, PipeChina, a state-owned enterprise controlling the national gas infrastructure, has refused to let other companies use the Bhai port, turning it into a specialized gateway for Russian LNG. This is despite the UK having added the port to the sanctions list since October.
In the context of its allies Europe and the US continuing to tighten sanctions targeting Russian gas, China is taking advantage of market space to increase cheap LNG purchases.
Russia, in turn, accepted to sell at a loss to keep cash flow for the Arctic LNG 2 project - which suffered heavy losses when its partner Totalenergies withdrew and the Arc7 transport fleet was blocked from purchasing by sanctions.
Experts say this 30-40% discount is unlikely to be extended, but it is currently the optimal solution for Novatek.
